Anyone know about the Nationwide Linc variable annuity?

[LiberalFighter]

It is identified as the Nationwide Lifetime Income Rider. A variable annuity.

It has to be in for 10 years before payout begins.

They show it with guarantee 7% simple interest with 5% payout for my age.

If I put in $100k which I don't have any intention for that amount the projected value will be $170k at the 10 year period.

At 1 year out the payout would be $5k, Y2 would be $5,350, Y3 would be $5,700, and Y10 would be $8,500. I'm not sure about the calculations. I seem to be missing something.

Are there any concerns about this plan?

[A HERETIC I AM]

1. Sounds like a very common "Step Up" type annuity. (Edited)

What they do is invest the money in such a way as to gain a steady 7% - not difficult to do with a large pool (It isn't just your money, but millions of other dollars as well) and then they distribute 5% of the principal per year. The "Step Up" means they are going to guarantee you that the withdrawal base will grow by at least 7% per year and from that they guarantee you 5% of the total. Since it steps up each year you get a raise, basically.

(Edited to add this - yeah...something is wrong with the math, but if they said "Projected" for the ten year period, that is the best case scenario. Obviously $5000 is not 5% of $170,000. and $5350 on year two is not an additional 5%, its an additional 7%. The broker should be able to give you the projected payout schedule - his advisor access to Nationwide I am sure has the calculator that gave him the figures.)

Not at all uncommon. My mother has a similar one through ING.

There should be a substantial death benefit, but since this is a variable annuity, the "Surrender value" will fluctuate with the stock and bond markets. Some are set up as you suggest this one is, with the withdrawal period put off for a period of time. Others allow withdrawal immediately. Without reading the prospectus and other documents, it is impossible to tell whether it is a good deal or not, but Nationwide Insurance is a good firm that has, from what I know of them, a good balance sheet.

One of the concerns would be the surrender period. That is the number of years the annuity will charge a fee if you want your money back. Most annuities of his type will have such a schedule with the percentage they would charge for full surrender on a sliding scale that decreases as time goes by. The longer the surrender period, the higher the commission to the broker, BTW. 3 years is very good. 5 to 7 is typical. 10 is long. Longer than ten is a ripoff.

[Common Sense Party]

2. Cost is always a concern.

Looks like this rider may add 1.2% to the cost of whatever annuity it's being added to. That might make it very expensive.

I'm not a big fan of 10 year surrender charges.

And you probably have to annuitize to get the "guaranteed" payout amount. Sometimes annuitization doesn't give you the flexibility you might need--I don't need income this year, I need MORE income next year.

Proceed with caution.